OVERLAND PARK, Kan. — I know you've heard many times that it's
the fundamentals — basic blocking and tackling – that separates winners from
losers. While football coaches coined the phrase, it's also true in your
buy-here, pay-here operation.

Headwinds and distractions like economic and political
trends, regulatory changes and advancements in technology can cause us to lose
sight of basic BHPH operating principles. But when the team isn't performing as
it should, don't make changes without first looking back to the basics.

The basics may be more tedious, but they are what make BHPH
successful.

Over the past several months, I have seen dealers struggling
against slower sales and an increase in repossessions primarily due to the
increase in special finance activity. Many dealers seem "surprised" when I
share how much special finance has affected BHPH, which tells me they are not
doing a good job keeping up with market trends.

I know when you're deep in the weeds of your operation it
can be difficult to be watching the horizon for big changes. Watching such
action helps to avert potential damage in advance, instead of reacting to the
change when it's too late. Watching the horizon is basic blocking and tackling.

I have also noticed an increase in collection issues. Many
of the delinquencies I have seen can be attributed to the special finance
surge. Customers with BHPH loans are questioning what they should do. So many
of their friends have gone to a franchise store to buy something new on a
longer term loan, so why shouldn't they?

Some customers have already made a purchase and are
reluctant to tell the BHPH dealer they are no longer paying for the car they
already have, or the BHPH vehicle is already a voluntary repo, and the BHPH
dealer hasn't been able (or willing) to dispose of the collateral and charge
off the loss.

Could better personal relationships have helped your
customer retention?

Technology is another trend that is impacting our business
model. New payment-taking technology has been growing for a few years with
advancements that have improved payment options and reduced costs.

There are dealers going all-in on the "buy here, pay
anywhere" philosophy. Some no longer use cashiers, encouraging customers not to
come back in the store to pay. This allows savings on personnel and less
concern about theft due to money handling. The hundreds of people that would
normally come in to pay on Friday afternoon or Saturday aren't crowding the lot
or building, which cuts down on chaos and leaves time for dealing with new
sales.

Is that really helping?

Years ago, when the Internet was just being discovered in
our industry, we were told car sales would be changed forever and that the
standard car dealership would be replaced by mall locations, kiosks and home delivery.
Now 20 years later, car sales are different, but car dealerships are bigger and
updated to make buyers more comfortable.

The prediction didn't happen because of the basics of sales
– impulse buying.

People need to touch, feel and visualize what they are
purchasing. How often have you heard, "I wasn't planning on buying today, but
Joe did a great job convincing me." It is the same with the push to make paying
more convenient.

As I look at collection numbers, I see many dealers' current
accounts dropping. Recency is down, along with collected dollars. I see dealers
are collecting below or near the payment amount per account monthly as what is
contracted, even with large numbers of delinquencies.

Could that be due to the "pay anywhere" philosophy?

Your collector calls a customer and makes an arrangement for
a past due amount. The customer pays something from a distance using a prepaid
card or online ACH. Not the agreed amount, but some percentage of what was due,
possibly the original payment without any arrearage.

Because there is no interaction with a regular cashier or
opportunity for a face-to-face with the collector, the customer pays something
and drives down the road. In this instance, technology has pushed the dealers
away from basic blocking and tackling.

I want the customers coming in to create more activity.
Cashiers and collectors "work" the customers to pay what they should while
creating a relationship necessary to increase collection activity. Good
cashiers and collectors can "guilt" customers into paying more than they may
have wanted.

When the customer has little money and other activities or
obligations on his mind, that little nudge can remind him of what should be a
priority.

In addition, having customers on the lot means your sales
people will be seeing these customers often and keeping that relationship open
so when trading time comes, they have already laid the groundwork for the next
sale.

Technology is great and getting better, but getting away
from the basics of personal interaction is getting away from what makes BHPH
work — building relationships throughout the process.

Gene Daughtry is an
executive conference moderator, trainer and consultant specializing in
BHPH/LHPH dealership operations for NCM Associates. Daughtry's 22-plus year
retail automotive experience began in a franchise dealership working in sales.
Through different operations he worked as a finance director, sales manager,
assistant general manager, general manager, and handled a startup of a new BHPH
operation. He can be reached at (800) 756-2620 or gdaughtry@ncm20.com. To learn more about
NCM Associates, visit www.ncm20.com.


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